A local accountancy firm says medium and large private sector companies must be ready for new off-payroll working rules which come into effect from 6 April 2020.
The same ruling was applied to the public sector in 2017 and now, to boost the objectives of the original IR35 legislation, HMRC is casting its net wider to the private sector.
Two decades ago, IR35 legislation was introduced to ensure that suppliers – working through intermediaries or personal services companies (PSCs) – paid similar levels of tax and National Insurance contributions to those paid by employees of the end user.
The objective is still the same but, from 6 April 2020, responsibility for working out whether the rules apply will shift from the PSC to the end client and, where they do, the fee payer must deduct tax and National Insurance from payments made to the worker’s PSC.
If the end client is a small private sector organisation, the existing IR35 rules apply. A private sector organisation is not small if at least two of the following apply:
• turnover of more than £10.2 million • balance sheet total of more than £5.1 million • more than 50 employees.
Samantha Melton, certified chartered accountant at Mapus-Smith & Lemmon, says many of the firm’s clients will be affected by this new ruling. “We are working with a number of clients to make sure they are ready for the new rules. It is important to identify individuals within current workforces who are supplying their services through personal service companies and to determine whether the off-payroll rules will apply for any contracts that extend beyond 6 April 2020. “Equally important to remember is that the underlying rules as to whether a worker is employed or self-employed have not changed and that these rules are still aimed at combatting disguised employment. Equally, workers should consider whether it is worth remaining off-payroll.” For help regarding these complexities and any other accounting queries, please contact Samantha Melton on 01366 383300.
